Difference Between Similar Terms and Objects

Difference Between AMC and TER


“AMC” and “TER” are terms in the field of stockholding and investments, particularly in the field of fund charges.

Total expense ratio (TER for short) is a measurement to estimates a fund’s operating costs in the form of a percentage. It is also referred to as management ’s total expense ratio or more informally as an expense ratio. The calculation in finding the total expense ratio is done by dividing the fund’s total costs over its total assets. The quotient from this calculation is expressed in a percentage as the total expense ratio.

Total assets are easy to know since there are statements and records to use as references. However, total costs are another story. There are a lot of components that make up the total costs of a mutual fund. Some of these include: management or investment advisory fees, commissions, operating expenses, and fees like administrative costs, 12b-1 distribution fees, trading fees, legal fees, and auditor fees. Annual management charge (or AMC) is also included in total costs like other charges such as share registration and custodian fees.

However, the total expense ratio doesn’t include transaction fees and performance fees.
It is important to determine and know the total expense ratio of a mutual fund because it shows how much profit, gain, or return from the said fund. Simply put, the initial return of the funds minus the total expense ratio shows the investor’s gain or profit from the fund.

Investors prefer the total expense ratio as the more accurate form of measurement compared to the annual management charge. The total expense ratio shows a more wholesome picture compared to the other type, and the AMC is only a component of the total costs. The total expense ratio is not published in any statement or records unlike the annual management charge.

The annual management charge is one of the components of the totals costs of a mutual fund. The AMC is a charge made by a financial institution or representatives who manage the investment accounts of individual investors. This charge is usually collected by a fund manager, stockbroker, or financial adviser. The usual rate for the annual management charge is .5% to 1.5% depending on the size of investment and the degree or importance of the counsel given to the investor. Assuming the highest percentage of charge rate, the usual breakdown of the charge is this: 2/3 per cent or (1%) goes to research, wages, and costs in managing the fund and the rest (.5%) is allocated for that trail commission for “servicing costs.” The trail commission is a controversial charge, but it is paid by investment management companies to financial advisers.

Unlike the total expense ratio, the annual management charge is published in statements and records, particularly in statements that require an investor to declare his assets and liabilities.


1.Total expense ratio and annual management charge are two relative terms when it comes to stockholding and investments.
2.A total expense ratio is the measurement to determine the percentage profit of the investor from the fund. In contrast, the annual management charge is only a component on total costs, one of the elements in computing the total expense ratio.
3.The total expense ratio presents the profit from the fund and is, therefore, considered a method to measure assets. 4.Meanwhile, the annual management charge can be considered as a liability since it falls under the total costs.
5.The total expense ratio gives a big picture on the fund’s performance and profitability while the annual management charge is only a small part in the whole picture of fund fees and charges. It is also a fraction of what investors have to pay.

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